Fortnightly - Michigan Public Service Commissionhttp://www.fortnightly.com/tags/michigan-public-service-commission
enConsumers Energy Contracts Barton Malow for New 105-MW Wind Power Parkhttp://www.fortnightly.com/consumers-energy-contracts-barton-malow-new-105-mw-wind-power-park
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><strong>Consumers Energy</strong> signed a contract with Barton Malow Company for engineering, procurement and construction services at its $255 million Cross Winds Energy Park, a 105-MW wind farm in Tuscola County, Michigan. The contract is subject to approval by the Michigan Public Service Commission. The contract includes designing, engineering and constructing the park's turbine foundations, access roads, an operations and maintenance building; erecting the park's 62 wind turbines; and building the infrastructure that connects the turbines to the electrical grid. Completion of Cross Winds is expected by late 2014.</p>
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<a href="/tags/consumers-energy">Consumers Energy</a><span class="pur_comma">, </span><a href="/tags/barton-malow">Barton Malow</a><span class="pur_comma">, </span><a href="/tags/epc">EPC</a><span class="pur_comma">, </span><a href="/tags/cross-wind-energy-park">Cross Wind Energy Park</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
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<div class="field field-name-field-news-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/news-categories/renewable-energy-news">Renewable Energy News</a></li></ul></div>Mon, 23 Sep 2013 17:17:17 +0000aburr16799 at http://www.fortnightly.comMichigan Public Service Commission Accepts AMI Opt-Out Programhttp://www.fortnightly.com/michigan-public-service-commission-accepts-ami-opt-out-program
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Addressing an issue reserved from a general rate case proceeding, the Michigan Public Service Commission has accepted an electric utility’s plan for offering residential customers an opportunity to opt out of the company’s advanced metering infrastructure (AMI) program. The utility, Consumers Energy Company, had previously been authorized to commence deployment of smart meters throughout its service area. However, in response to complaints that exposure to the radiofrequency emissions of the AMI equipment could give rise to health and safety risks, the utility had been instructed to develop an opt-out plan, premised on cost-of-service principles. (<em>Case No. U-17087, Mich.P.S.C.)</em> For more analysis, subscribe to URN. <a href="http://www.fortnightly.com/utility-regulatory-news-0">http://www.fortnightly.com/utility-regulatory-news-0</a></p>
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<a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/consumers-energy-company">Consumers Energy Company</a><span class="pur_comma">, </span><a href="/tags/opt-out-plan">opt-out plan</a><span class="pur_comma">, </span><a href="/tags/smart-meter-deployment">Smart meter deployment</a><span class="pur_comma">, </span><a href="/tags/radiofrequency-emissions">radiofrequency emissions</a><span class="pur_comma">, </span><a href="/tags/cost-service-principles">cost-of-service principles</a> </div>
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<div class="field field-name-field-news-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/news-categories/metering-news">Metering News</a></li></ul></div>Wed, 07 Aug 2013 17:30:25 +0000aburr16723 at http://www.fortnightly.comMichigan Public Service Commission Amends AMI Privacy Policieshttp://www.fortnightly.com/michigan-public-service-commission-amends-ami-privacy-policies
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The Michigan Public Service Commission, concerned that existing consumer privacy policies were not expansive enough and were disproportionately directed at customer data collected through advanced metering infrastructure (AMI) equipment, amended its privacy policies to assure that all customer usage information possessed by the state’s energy utilities, and not just that collected via AMI, would be protected. The commission explained that as metering and billing technologies evolve, so, too, must customer privacy practices adapt. (<em>Case No. U-17102, Mich.P.S.C.)</em> For more analysis, subscribe to URN. <a href="http://www.fortnightly.com/utility-regulatory-news-0">http://www.fortnightly.com/utility-regulatory-news-0</a></p>
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<a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/consumer-privacy-policies">consumer privacy policies</a> </div>
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<div class="field field-name-field-news-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/news-categories/metering-news">Metering News</a></li></ul></div>Wed, 07 Aug 2013 17:20:15 +0000aburr16713 at http://www.fortnightly.comDTE to Implement New Power Supply Cost Recovery (PSCR) Rate Planhttp://www.fortnightly.com/dte-implement-new-power-supply-cost-recovery-pscr-rate-plan
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In authorizing Detroit Edison Company, now operating as DTE Electric Company, to implement a new power supply cost recovery (PSCR) rate plan, the Michigan Public Service Commission (PSC) declined a request that it declare it unlikely that it would allow full recovery in the future of the utility’s requested PSCR costs due to the company’s continued operation of its aging coal plants. Instead, the commission endorsed the company’s continued participation in a so-called “reduced fuel emission” (REF) project with a corporate affiliate. Under the REF program, the affiliated fuel companies will treat the coal with REF adder and then resell the treated coal to DTE for immediate consumption. (<em>Case No. U-16892, Mich.P.S.C.)</em> For more analysis, subscribe to URN. <a href="http://www.fortnightly.com/utility-regulatory-news-0">http://www.fortnightly.com/utility-regulatory-news-0</a></p>
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<a href="/tags/detroit-edison-company">Detroit Edison Company</a><span class="pur_comma">, </span><a href="/tags/dte-electric-company">DTE Electric Company</a><span class="pur_comma">, </span><a href="/tags/power-supply-cost-recovery">power supply cost recovery</a><span class="pur_comma">, </span><a href="/tags/pscr">PSCR</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/psc">PSC</a><span class="pur_comma">, </span><a href="/tags/declined-request">declined request</a><span class="pur_comma">, </span><a href="/tags/aging-coal-plants">aging coal plants</a><span class="pur_comma">, </span><a href="/tags/reduced-fuel-emission">reduced fuel emission</a><span class="pur_comma">, </span><a href="/tags/ref-program">REF program</a> </div>
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<div class="field field-name-field-news-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/news-categories/generation-markets-news">Generation &amp; Markets News</a></li></ul></div>Wed, 07 Aug 2013 17:19:17 +0000aburr16712 at http://www.fortnightly.comConsumers Energy Submits Plan to Build New Natural Gas Plant in Michiganhttp://www.fortnightly.com/consumers-energy-submits-plan-build-new-natural-gas-plant-michigan
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><strong>Consumers Energy</strong> filed for approval of a certificate of necessity with the Michigan Public Service Commission (MPSC) for its new natural gas plant in Genesee County. The certificate of necessity filing, allowed for under Michigan's energy reform law, provides Consumers Energy's comprehensive analysis for the 700-MW natural gas plant planned for Thetford Township, about 20 miles northeast of Flint. The review process for the filing is expected to take nine months. The current project schedule calls for construction to begin in 2014 and for the new combined cycle power plant to begin serving Consumers Energy's electric customers in 2017.</p>
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<a href="/tags/consumers-energy">Consumers Energy</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/mpsc">MPSC</a><span class="pur_comma">, </span><a href="/tags/natural-gas">Natural gas</a><span class="pur_comma">, </span><a href="/tags/certificate-necessity">certificate of necessity</a><span class="pur_comma">, </span><a href="/tags/genesee-county">Genesee County</a><span class="pur_comma">, </span><a href="/tags/thetford-township">Thetford Township</a> </div>
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<div class="field field-name-field-news-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/news-categories/state-regulation-policy-news">State Regulation &amp; Policy News</a></li></ul></div>Tue, 23 Jul 2013 19:45:55 +0000aburr16670 at http://www.fortnightly.comMichigan PSC OKs AMI Opt-Out for Detroit Edisonhttp://www.fortnightly.com/michigan-psc-oks-ami-opt-out-detroit-edison
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The Michigan Public Service Commission (PSC) authorized Detroit Edison to implement an AMI opt-out program. The commission approved the specifics of the opt-out proposal submitted by the utility, except that it reduced the associated charges recommended by the company, finding that the company’s forecasted participation rate was too low. <em>For complete regulatory coverage, citations, and analysis, <strong>subscribe to Utility Regulatory Ne</strong></em><strong>ws <a href="http://www.fortnightly.com/urn-subscribe">http://www.fortnightly.com/urn-subscribe</a></strong></p>
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<a href="/tags/smart-meters">Smart meters</a><span class="pur_comma">, </span><a href="/tags/opt-out">opt-out</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/detroit-edison">Detroit Edison</a> </div>
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<div class="field field-name-field-news-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/news-categories/state-regulation-policy-news">State Regulation &amp; Policy News</a></li><li class="taxonomy-term-reference-1"><a href="/news-categories/metering-news">Metering News</a></li></ul></div>Sat, 01 Jun 2013 18:00:50 +0000aburr16621 at http://www.fortnightly.comHedging Under Scrutinyhttp://www.fortnightly.com/fortnightly/2012/02/hedging-under-scrutiny
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Planning ahead in a low-cost gas market.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Julie Ryan and Julie Lieberman</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Energy Risk &amp; Markets</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Julie Ryan</b> is a vice president and <b>Julie Lieberman</b> is a project manager with Concentric Energy Advisors. The authors acknowledge the editorial contributions of Steve Caldwell and Carrie O’Neill.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - February 2012</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The new world of gas supply, brought about by shale development, the economic downturn, and expanded gas infrastructure, has caused regulatory stakeholders to challenge utility gas supply hedging programs.</p>
<p>Hedging, a common feature of utility risk management practices, serves as a tool to stabilize prices, protect customers from market volatility, and insure against unexpected price spikes. However, regulatory commissions and intervenors are challenging the merits of their utilities’ hedging programs with increasing frequency, questioning whether the risk mitigation benefits of hedging have justified the associated costs, and whether customers are paying for insurance to manage a risk that might no longer exist.</p>
<p>Concerns raised by commission staff or other stakeholders relating to the cost of utility hedging programs has led to an emerging trend of greater commission and stakeholder involvement in assessing such programs’ efficacy. Regulatory commissions are asking utilities to provide written justification of their hedging practices, applying pressure on utilities to work with stakeholders to resolve hedging differences through collaborative processes and to find common ground on the risk-reward spectrum. In some cases, risk management hedging programs have been suspended until there are visible increases in volatility and market prices.</p>
<p>Utilities that engage stakeholders in a dialogue now about their risk-management practices can ensure hedging remains a viable tool for limiting exposure to future price volatility.</p>
<h4>Costs Incurred and Avoided</h4>
<p>This shift toward re-assessing hedging practices is relatively recent. In 2008, a survey conducted by the National Regulatory Research Institute (NRRI) indicated that most commissions in the U.S. either supported or were neutral to hedging.<sup>1</sup> This was reinforced in a follow-up survey the AGA conducted in 2009.<sup>2</sup> Among more than 100 respondents, over 90 percent said their commissions allowed financial hedging of commodity price risk. However, only a very small number of commissions required utilities to engage in financial hedging.</p>
<p>Push-back on utility hedging typically begins with intervenors. Ultimately, however, most administrative law judges and commissions generally support hedging. While intervenors often recommend disallowance of hedging costs, commissions generally accept that the goal of hedging is price stability and not “to beat the market.” As a result, cost disallowance decisions by commissions have been rare.<sup>3</sup> But, in an environment where utility customers are experiencing across-the-board rate increases, it isn’t surprising that commissions would encourage utilities to evaluate changes to their hedging programs.</p>
<p>Intervenors have tended to take a retrospective view when evaluating the efficacy of hedging programs. While it’s tempting to look at historical hedging based on current information and perfect hindsight, the regulatory standard for what is reasonable and prudent must consider the availability of information and what was known at the time hedging decisions were made. This is the standard commissions have adopted when reviewing historical hedging costs.</p>
<p>Many stakeholders have focused on costs associated with hedging, but there has been less focus by all parties on avoided cost analysis. In several instances, success—or lack thereof—has been measured by comparing the hedged prices to spot market prices. The costs have included net premiums paid for call options, as well as the difference between the fixed price or option strike price and the spot market price. There is often a failure to see the cost of options as an insurance premium, as well as to consider a fixed price as a rate stabilization tool. Further, what’s missing is more analysis of the potential avoided cost. Additional scenario analysis would demonstrate the risk of what could have occurred as well as estimate the potential price exposures avoided as a result of hedging.</p>
<p>Additionally, some stakeholders raise the concept of “least cost” in hedging program critiques. Care must be exercised when applying the least-cost principle to hedging, which presents trade-offs in risk, reward, and costs, depending upon the hedging instrument. Using the analogy of insurance, it is possible to buy an inexpensive policy with a low premium, but this is usually accomplished by increasing the deductible, placing a cap on the total payout, or carving out conditions under which benefits aren’t paid. Additionally, different hedging strategies yield different benefits, depending on market price direction. For example, if a utility is purchasing energy in a rising-price market, a fixed price purchase might be optimal as there is no option payment incurred and the coverage starts immediately. In a range-bound market, a costless collar might be the lowest cost of insurance, and in a declining market, a cap at a relatively high strike might be the most attractive form of hedge protection.</p>
<h4>The Shale Gas Factor</h4>
<p>A review of comments filed by commission staff and other stakeholders shows that shale gas development is repeatedly referred to as a “game changing” technology. Shale gas producers access prolific geological deposits of reserves for production at relatively low costs, which has led to significantly dampened price volatility and lower market prices.</p>
<p>While the emergence of shale gas production is generally well-known by intervenors and regulators, the broader market dynamics are less well understood. Equally important is the fact that new pipeline infrastructure has served to deliver shale gas supplies into what historically have been transportation-constrained end markets, thereby changing traditional basis-pricing relationships and further easing price volatility. Additionally, new LNG import facilities and expansions in natural gas storage capacity in recent years have contributed to expanded supply capacity. These supply and capacity additions have occurred at the same time that demand has declined. On the demand side, increasing energy efficiency measures and declining demand resulting from weak economic conditions have dampened consumption.</p>
<p>However, history repeatedly has shown that commodity market conditions are never stagnant, and that markets often correct as supply and demand factors re-balance. The recent 24 months of price declines have lulled many stakeholders into believing that low gas prices are now the norm, but market conditions will change at some point. The question is when, how quickly, and to what degree? If we have learned anything from the past, it is that we cannot predict the future with certainty. In the future, changing supply-demand factors might turn market prices in the other direction.</p>
<p>Utilities will want to be prepared before a market shift occurs. On the supply front, there might be environmental regulation that slows shale gas production, additional compliance requirements that increase shale gas production costs, or technical factors that reduce the projected size of economical reserves. Natural gas demand might increase due to stymied nuclear plant development, rising coal plant operating costs, or closures of coal plants as a result of environmental compliance. New demand could result from economic recovery, LNG exports, or new natural gas and electric vehicle use. A combination of these factors could cause the North American gas supply-demand balance to materially shift, bringing about increases in market prices and volatility.</p>
<p>As market prices have dropped, many stakeholders are encouraging utilities to adapt their hedging practices to the current market supply and pricing paradigm. Some have suggested utility hedging be reduced until such time as gas market prices show some sign of rallying. Others are taking a more proactive stance, encouraging longer-dated hedging and new hedging program design.</p>
<p>Two commissions that recently have suspended hedging activities are the Public Utilities Commission of Nevada (December 2010), with respect to Nevada Power, and the British Columbia Utilities Commission (July 2011), in regard to FortisBC. The commissions didn’t disallow previously executed hedge transactions, and they left existing hedges in place; the decisions applied to future hedging activity.</p>
<p>In its Dec. 16, 2010 order (Docket No. 10-09003), the Nevada PUC approved a stipulation that included the requirement that Nevada Power not proceed with any additional financial gas hedges. However, the utility was told it should continue reviewing natural gas hedging in light of prevailing market fundamentals and conditions.<sup>4</sup> More recently, on July 22, 2011, the British Columbia Utilities Commission rejected FortisBC’s “Price Risk Management Plan.” In the order, the Commission Panel wrote: “in light of the recent exploitation of shale gas, the likelihood for more stable natural gas prices is significantly greater and the risk of dramatically higher natural gas prices, excepting short periods of price disconnects, is significantly lower than it has been in many years.”<sup>5</sup> Further, the panel suggested that hedging was not the best way to deal with the potential for price increases, but commented that if there were a change in market conditions, they would be willing to consider proposals to mitigate price risks for customers. They concluded by saying that the performance of the utility’s “Price Risk Management Plan” over the last 10 years did not convince them that continuation of the program was in the ratepayers’ interest.</p>
<h4>Measuring Prudence</h4>
<p>Hedging programs are undergoing a greater degree of regulatory scrutiny. In some instances, hedging programs have been scrutinized and continued without modification, while in other cases, hedging programs have been targeted for additional review.</p>
<p>In spring 2009, the Colorado Public Utilities Commission commented on testimony filed by commission staff, which criticized gas hedging by Xcel’s subsidiary, Public Service Company of Colorado. The staff had conducted a quantitative analysis to determine that during the period following Hurricane Katrina (2005-2006), the utility’s hedges were close to breaking even, <i>i.e.</i>, the premium paid for hedging nearly equaled the benefits it provided over spot market prices. But a break-even analysis of the hedging costs compared to spot market prices for the period 2005 to 2008 illustrated that the utility only regained approximately one third of every dollar spent on hedging. Ultimately, in its order, the commission supported the administrative law judge’s position that the utility’s hedging program should not be suspended. In his recommended decision, the judge wrote, “Preapproved elements of the [hedging] plan avoid hindsight evaluation of each program. Simply stated, [the plan] is to be evaluated based upon information available at the time, not in terms of whether the plan ‘beat the market.’ To the extent Public Service implements such a plan, as approved, the associated hedging costs should not be subject to disallowance in any subsequent gas cost prudence review proceedings.”<sup>6 </sup></p>
<p>In another example, a commission decided to open a utility’s hedging program to further review. In May 2011, in response to PacifiCorp’s rate filing for Rocky Mountain Power, the Utah Industrial Energy Consumers filed direct testimony asking the Utah Public Service Commission to disallow $19.7 million in revenue requirements related to what the group called “imprudent hedging practices” by the utility. Rocky Mountain Power’s hedging program layered-in hedges 48 months into the future, hedging nearly 100 percent of its open commodity price risk. In the industrial group’s testimony, it commented that the utility’s hedging program wasn’t adjusted to account for changes in market conditions and the expanding supply of natural gas through shale gas production.<sup>7</sup> Hence, the industrial group suggested the utility was imprudent to hedge such a large percentage of its open positions and should have reduced its fixed-price hedges, to leave open one-third of its portfolio to spot market pricing.</p>
<p>In July 2011, a stipulation was filed with the Utah PSC where the parties agreed to a collaborative process to review possible changes to the company’s hedging practices. As part of the stipulation, it was agreed that the utility’s past hedges wouldn’t be disallowed, but that the utility would implement any changes that result from the collaborative process or commission order. Issues addressed in the collaborative process included: a new maximum hedge volume percentage limit or range; risk tolerance bands based on time-to-expiry value-at-risk (TEVaR) or value-at-risk (VaR) limits; position limits; a process for review of hedging transactions outside of accepted guidelines, including natural gas reserves or storage; liquidity, transparency, and other risks of different hedging tools such as financial swaps, fixed-price physical forward contracts, and options; a semi-annual confidential report on hedging status; and coordination and implementation issues relating to the inclusion of financial swap transactions in Rocky Mountain Power’s energy balancing account.<sup>8</sup> The stipulation was approved in a commission order on Sept. 13, 2011, and PacifiCorp and the other stakeholders were expected to complete discussions by January 2012.</p>
<p>In February 2011, the South Carolina Office of Regulatory Staff (ORS) requested suspension of the hedging programs of South Carolina Electric and Gas (SCE&amp;G) and Piedmont Natural Gas. The ORS commented that the hedging costs incurred by the utilities might be appropriate for markets where there is significant price volatility, but were not appropriate for more stable natural gas market conditions. According to the ORS, SCE&amp;G’s hedging program cost customers more than $50 million since 2006, and Piedmont’s program cost over $37 million since 2002.<sup>9</sup> This request for suspension was later withdrawn in July 2011, and it was determined that the utilities and the ORS would address the prudence of the hedging activities in each of the companies’ respective annual purchased gas adjustment (PGA) proceedings.<sup>10 </sup></p>
<p>In SCE&amp;G’s PGA proceeding, the ORS evaluated the company’s hedging program and affirmed its previous recommendation that the hedging program should be suspended. SCE&amp;G agreed to immediately suspend all hedging until the commission directs it to recommence. The agreement anticipates that changing market conditions—<i>e.g.</i>, environmental restrictions on shale gas production—could warrant a resumption of hedging.<sup>11</sup> Conversely, Piedmont’s hedging program was approved in its PGA proceeding with the removal of its previously established minimum hedging requirement of 22.5 percent. Although Piedmont’s gas purchasing and hedging activities were deemed to be prudent, there was disagreement on whether gas purchasing and hedging activities, pursuant to a commission-approved hedging program, should be subject to an after-the-fact prudence determination. The commission requested an <i>ex-parte</i> briefing on the issue of how to measure prudency in hedging programs.<sup>12</sup></p>
<h4>Strategic Adaptation</h4>
<p>In some jurisdictions, regulators are modifying the hedging program horizon and limiting discretionary actions. In Delaware, Delmarva Power has a programmatic hedging program with periodic hedging at pre-determined intervals. In 2009, the utility reduced the tenor and the total volume of hedging. More recently, in response to Delmarva Power’s “Gas Cost Rate” filing, a consultant for the commission staff proposed two alternative hedging strategies to enhance flexibility in the hedging framework and to provide a greater smoothing effect on gas price spikes. The consultant recommended either lengthening the “hedging interval” beyond 18 months to take advantage of lower volatility in outer months; or implementing dollar cost averaging,<sup>13</sup> with fixed dollars allocated for hedges rather than fixed volumes, so that hedging volumes would increase in low-priced market environments and would decrease in higher-priced market environments. The consultant stated that dollar cost averaging results in lower gas costs when compared to a less-flexible, programmatic hedging strategy.<sup>14</sup> Although no changes were made to Delmarva Power’s gas hedging program, the company agreed to review and discuss the staff consultant’s recommendations for modification.<sup>15</sup></p>
<p>In Michigan, intervenors in the Consumers Energy rate case proposed a range of changes to reduce the volume and tenor of hedging under the utility’s fixed-price hedging program to address concerns that the utility was over-hedging with fixed-price purchases. In that proceeding, intervenors urged the commission to eliminate the “tiered” strategy, which provided for programmatic purchases of fixed price supply in accordance with monthly hedge targets, and suggested modifications to the company’s “quartile” strategy, which it had employed in tandem with the tiered strategy, using historical pricing to determine the amount of forward market hedging. All parties proposed a reduction in annual hedging caps. The ALJ decision supported the company’s proposed plan, but indicated that certain accelerated purchases under the tiered strategy would require justification by market conditions to be deemed prudent.<sup>16</sup> At this writing, a final decision in this proceeding was pending.</p>
<p>In California, parties to the electric utilities’ procurement plan filings are discussing moving from fixed caps on hedging, as determined by the consumer rate tolerance (CRT) of 1 cent per kilowatt hour, to a restructured CRT that represents a percentage of the individual utility’s system average rate. By moving to a percentage of the system average rate, the percent hedged under the CRT would remain constant and wouldn’t fluctuate with rate changes.<sup>17 </sup></p>
<h4>Locking-In for the Long-Term</h4>
<p>The Public Utility Commission of Oregon approved a $250 million investment in reserves by its gas utility, Northwest Natural. The utility entered an agreement with Encana Oil &amp; Gas (USA) to develop physical gas reserves expected to supply a portion of the utility customers’ requirements over a period of about 30 years, with 8 to 10 percent of Northwest Natural’s average annual requirements supplied through the arrangement. The Commission approved the utility’s plan in April 2011, allowing the utility to recover the costs of gas produced and delivered, plus a rate-base return on investment through its annual PGA mechanism.<sup>18 </sup></p>
<p>In Colorado, the <i>Clean Air - Clean Jobs Act</i> of 2010 (HB 10-1365), included a legislative provision to facilitate fuel-switching from coal to natural gas, while protecting ratepayers from volatility in prices. The provision provides regulatory certainty that utilities will be allowed full cost recovery, without risk of future disallowance, for commission-approved, long-term gas contracts—of between three and 20 years in duration—entered into pursuant to the act.<sup>19</sup> To that end, Public Service Company of Colorado and Anadarko entered a 10-year, fixed-price gas supply agreement, subject to annual price escalations, that is projected to result in savings to ratepayers of approximately $97 million, when compared to forecast gas costs without the contract.<sup>20</sup></p>
<p>Black Hills Energy of Colorado has incorporated a long-term hedging strategy into its “Gas Mitigation Plan.” The plan provides for hedging between 50 and 70 percent of its gas requirements under normal conditions, with the remaining gas requirements purchased in the monthly or daily spot market. Of the hedged volumes, half are comprised of fixed-price swaps phased in over three separate terms: three years, five years, and seven years. The long-term hedges, once fully phased-in, will represent approximately half of the company’s normal annual volume requirements. Another 20 percent of the gas supply requirements are hedged using call options in a short-term hedging strategy for the upcoming year.<sup>21 </sup></p>
<p>Commissions will continue to review their utilities’ hedging plans in a critical light, and it will be necessary for utilities to work in collaboration with stakeholders to consider adaptations to hedging plans that respond to new market conditions and that protect customers in the event of rising gas and power prices.</p>
<h4>Window of Opportunity</h4>
<p>Hedging objectives are an important part of the dialogue between commissions and utilities, and avoided costs need to be considered in developing a hedging program. “Hedging” can mean different things to different parties. Therefore, an important first step is to obtain broad consensus about the objectives of the utility’s hedging program. By way of simple example, one objective could be that hedging is intended to protect customers against price spikes during certain high usage seasons, while another objective might be to protect customers against rising price trends that could occur over an extended period of time.</p>
<p>One benefit arising from the increased focus on utility hedging is that regulators and stakeholders have grown increasingly sophisticated about commodity markets and hedging, and some might support more complex programs in the future. However, the more discretionary a program design, the more critical decisional documentation and transparent processes become. Further, there must be rigor and consistency in how hedging is adjusted in different market price environments. It will be important in the design and approval stage that the hedging program has clear triggers for when hedging decisions will be executed. During the implementation stage, it will be important for utilities to document information that was known to them at the time hedges were transacted to demonstrate that reasonable actions were taken, consistent with the program design.</p>
<p>It is somewhat ironic that in today’s market, as the price of hedging has declined, stakeholder support for hedging has waned. The low-price and low market-volatility environment introduces opportunities to execute hedges at historically attractive price levels. If utilities were to abstain from hedging until volatility increased and market prices rose, the cost of hedging would increase to the point where hedging could be deemed by regulators to be too costly for ratepayers.</p>
<p>In jurisdictions where intervenors and perhaps regulators might be reluctant to support an expansive hedging program at current lower market prices, utilities should use a collaborative process to garner support. The first objectives would be to improve stakeholders’ understanding of the supply-demand market fundamentals that have contributed to current lower prices, and to explain future trends and events that could move market prices upward. A better understanding of market drivers and how prices could potentially change will help stakeholders appreciate the utility’s need to be ready with hedging strategies to protect customers from rising wholesale market prices.</p>
<p>The second objective would be to engage stakeholders in a dialogue about how the utility’s current hedging program was developed, and to listen to stakeholders’ concerns. Working collaboratively, it is possible for all the parties to bring a fresh perspective to the hedging program and consider how it might be adapted under varied market conditions. Such efforts will yield the greatest benefit for utilities and their customers if they happen before supply-demand conditions materially change market prices, and the current window of opportunity closes.</p>
<p> </p>
<h4>Endnotes:</h4>
<p>1. National Regulatory Research Institute, <i>NRRI Services: Survey on State Commission and Local Gas Distribution Company Actions in Addressing High Natural Gas Prices</i>, (July 3, 2008).</p>
<p>2. Bruce McDowell, <i>AGA Rate Inquiry: Regulatory Hedging Policies</i>, American Gas Association, (Fall 2009).</p>
<p>3. In a recent commission order (Docket No. UE 228), the Public Utility Commission of Oregon penalized Portland General Electric (PGE) for failure in 2007 to document the reasons for executing 2012 gas hedges. In its decision, the Commission noted its 2002 order (in Docket No. UE 139) in which the commission disallowed costs associated with certain of PGE’s forward power purchases citing the company’s failure to provide evidence regarding price trends or internal company market analyses that might have supported the reasonableness of the company’s decisions. In its decision in UE 228, the commission reduced the utility’s 2012 net variable power costs forecast by $2.6 million “to ensure management’s future compliance” with commission orders. The penalty was calculated as the monetary equivalent of a one-year, 10-basis-point reduction in PGE’s authorized return on equity. Public Utility Commission of Oregon, Docket No. UE 228, <i>2012 Annual Power Cost Update Tariff</i>, (Nov. 2, 2011).</p>
<p>4. Public Utilities Commission of Nevada, Docket No. 10-09003, <i>Application of NV Power Co d/b/a NV Energy for Approval of its Energy Supply Plan Update for 2011-2012</i>, Order (Dec. 16, 2010) and Stipulation (Nov. 9, 2010). Note, in September 2011, Nevada Power submitted a proposal to engage in new hedging, using out-of-the-money call options in its filing to the Public Utilities Commission of Nevada, <i>Application of Nevada Power Company d/b/a NV Energy for Approval of its Energy Supply Plan Update for 2012</i>, Docket No. 11-09003, (Sept. 1, 2011). However, in its draft order in the same docket, dated Dec. 14, 2011, the commission rejected NV Energy’s hedging proposal and ordered NV Energy to continue the existing commission-approved hedging strategy described in the stipulation that the commission approved in Docket No. 10-09003 on Nov. 9, 2010, without exception.</p>
<p>5. British Columbia Utilities Commission, Order Number 6-120-11, <i>Application by Terasen Gas Inc. and Terasen Gas (Vancouver Island) Inc. (collectively Terasen Gas) (now FortisBC Energy Inc. and FortisBC Energy (Vancouver) Inc.) for Approval of the Price Risk Management Plan Effective April 2011-October 2014</i>, (July 12, 2011).</p>
<p>6. Public Utilities Commission of the State of Colorado, Docket No. 08A-095G, <i>In the Matter of the Application of Public Service Company of Colorado for Authorization to Continue in Effect, On a Permanent Basis, Its Monthly Gas Cost Adjustment Tariffs, With Modifications to provide For Symmetrical Interest on Deferred Balanced of Over- And Under-Recovered Gas Costs, and to Extend For an Additional Four-Year Period the Current Procedures for Seeking and Obtaining Authorization to Implement Annual Gas Price Volatility Mitigation Plans for Its Gas Sales Customers</i>, (March 2, 2009).</p>
<p>7. Public Service Commission of Utah, Docket No. 10-035-124, Direct Testimony of J. Robert Malko, Utah Industrial Energy Consumers, <i>In the Matter of the Application of Rocky Mountain Power for Authority to Increase its Retail Electric Utility Service Rates in Utah and for Approval of its Proposed Electric Service Schedules and Electric Service Regulations</i>, (May 26, 2011).</p>
<p>8. Public Service Commission of Utah, <i>Rocky Mountain Power Settlement Stipulation, (July 28, 2011) and report and order, Rocky Mountain Power 2011 General Rate Case</i>, Docket Nos. 10-035-124, 09-035-15, 10-035-14, 11-035-46 and 11-035-47, (Sept. 13, 2011).</p>
<p>9. South Carolina Office of Regulatory Staff, <i>Letter Re.: Request for Suspension of SCE&amp;G and Piedmont Gas Hedging Programs</i>, Docket No. 2011-82-G, (Feb. 24, 2011).</p>
<p>10. Public Service Commission of South Carolina, Commission Directive, Docket No. 2011-82-G, Order 2011-402, (July 13, 2011).</p>
<p>11. Public Service Commission of South Carolina, Settlement Agreement, <i>IN RE: Annual Review of Purchased Gas Adjustment and Gas Purchasing Policies of South Carolina Electric &amp; Gas Company</i>, Docket No. 2011-5-G, (Nov. 2, 2011).</p>
<p>12. Public Service Commission of South Carolina, Order Ruling On Purchased Gas Adjustment And Gas Purchasing Policies, <i>IN RE.: Annual Review of Purchased Gas Adjustment and Gas Purchasing Policies of Piedmont Natural Gas</i>, Docket No. 2011-4-G – Order No. 2011-580, (Aug. 17, 2011).</p>
<p>13. Dollar cost averaging is the technique of hedging a fixed dollar amount of a particular commodity on a regular schedule, regardless of the contract price. More contracts are purchased when prices are low, and fewer contracts are purchased when prices are high.</p>
<p>14. Public Service Commission of Delaware, PSC Docket No. 010-295F, Direct Testimony of Richard W. Lelash on behalf of the Staff of the Delaware Public Service Commission, <i>In the Matter of the Application of Delmarva Power &amp; Light Company for Approval of Modifications to Its Gas Cost Rates</i>, (Feb. 10, 2011).</p>
<p>15. Public Service Commission of Delaware, Order No. 8061, <i>In the Matter of the Application of Delmarva Power &amp; Light Company for Approval of Modifications to Its Gas Cost Rates</i> (Filed Aug. 31, 2010), PSC Docket No. 010-295F, (Oct. 18, 2011).</p>
<p>16. Michigan Public Service Commission, Case No. U-16485, Notice of Proposal for Decision, ALJ Sharon L. Feldman, <i>In the Matter of the Application of Consumers Energy Company for Approval of a Gas Cost Recovery Plan and Authorization of Gas Cost Recovery Factors For the 12-Month Period April 2011- March 2012</i>, (Sept. 12, 2011).</p>
<p>17. California Public Utilities Commission, Rulemaking 10-05-006, <i>Proposed Decision Approving Modified Bundled Procurement Plans</i>, Proposed Decision of ALJ Peter Allen, (Nov. 10, 2011).</p>
<p>18. Northwest Natural, Securities and Exchange Commission, 10-Q filing (First Quarter 2011).</p>
<p>19. See Colorado General Assembly H.B. 10-1365, Section 40-3.2-206. Part 4 (signed into law April 19, 2010).</p>
<p>20. <i>Statement of Position of Public Service Company of Colorado</i>, in Docket No. 10M-245E, at 72, (Nov. 29, 2010)</p>
<p>21. Direct Testimony of Trent Cozad, Docket No. 11A-580E before the Colorado Public Utility Commission <i>(Re: Gas Mitigation Plan)</i>, pp.3-7.</p>
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Wed, 01 Feb 2012 05:00:00 +0000puradmin13421 at http://www.fortnightly.comSpent-Fuel Fedcorphttp://www.fortnightly.com/fortnightly/2011/05/spent-fuel-fedcorp
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>The Blue Ribbon Commission’s best answer for the nuclear waste dilemma.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>John A. Bewick</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>John A. Bewick</b> is <i>Fortnightly’s</i> contributing editor and formerly was secretary of environmental affairs for the Commonwealth of Massachusetts. He holds advanced degrees in nuclear science and business management.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 2011</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>For America’s nuclear power operators, the future looks more uncertain than it has for almost 30 years.</p>
<p>Among all the complex political, financial and technical issues affecting the country’s nuclear future, the spent-fuel dilemma has proved to be one of the most difficult. However, just as the Department of Energy’s Blue Ribbon Commission on America’s Nuclear Future (BRC) prepares to issue its recommendations for a new approach to spent-fuel management, the Fukushima disaster has focused tremendous public attention on nuclear risks—adding pressure to a problem that already was nearing critical mass.</p>
<p>With the insistent media focus on details of the Fukushima-Daiichi failure, American citizens have learned that spent nuclear fuel pools aren’t protected by containment, and that many such pools have exceeded their designed capacity. This awareness has increased fear of radiation exposure, and fueled growing opposition to nuclear power. Recent polls show support for nuclear power has diminished drastically since before the Fukushima disaster. <i>(See “Nuclear Power in US: public support plummets in wake of Fukushima crisis,” Christian Science Monitor, March 22, 2010)</i>.</p>
<p>This change in support arrives just one year after President Barack Obama abruptly canceled the Yucca Mountain project, leaving DOE without a credible long-term plan for the permanent disposal of U.S. spent nuclear fuel, pursuant to its obligations under the Nuclear Waste Policy Act (NWPA) of 1982. Lawsuits filed by nuclear operators claim damages now reaching $1.8 billion, with the federal government’s legal exposure to such litigation projected to balloon to more than $13 billion over the next decade. According to Kim Cawley with the Congressional Budget Office, each year of delay adds between $300 and $400 million in liabilities to the budget deficit, at a time when Congress is paying intense attention to deficits.</p>
<p>In this context, public trust and confidence in nuclear power seems unlikely to be restored unless, among other things, the federal government defines a credible path forward for developing a repository for spent nuclear fuel. Tasked with finding this path forward, the BRC has been engaged in hearings and technical investigations for more than a year, with draft recommendations expected to be released this summer. Sources tell <i>Fortnightly</i> the BRC likely will advise the federal government to create a new entity to manage disposal of spent nuclear fuel—probably a federal corporation (fedcorp) modeled on TVA.</p>
<p>A spent-fuel fedcorp could remove the constraints of the annual congressional budget cycle, allowing predictable annual financial support and improving the odds that a safe and effective future can be crafted for long-term management of depleted fuel rods and other radioactive materials. Similar approaches in Sweden and Finland have succeeded in moving their spent-fuel storage projects toward construction. And such a fedcorp—the Nuclear Fuels Management Corp.—was proposed in Congress by Sen. George Voinovich (R-Ohio, now retired), first in 2008 ((S.3661), <i>The United States Nuclear Fuel Management Corporation Establishment Act of 2008</i>), and most recently last year (S.3322), with a companion bill sponsored by Rep. Fred Upton (R-Mich.), who now chairs the House Energy &amp; Commerce Committee.</p>
<p>Although the Fukushima crisis might have delayed or even ended the nuclear renaissance, it also has intensified the urgency of fuel-cycle issues. “Spent fuel is one issue that has been on the table in this country for a long time,” Voinovich told <i>Fortnightly</i>. “It has ping-ponged back and forth, and it’s now time to deal with it forthrightly.”</p>
<h4>Why Fedcorp?</h4>
<p>Federal agency management of such a large and complex project through the Department of Energy has failed to produce a spent-fuel storage solution, although the last 20 years have seen many attempts. Numerous factors have conspired to prevent a successful outcome.</p>
<p>First, annual appropriations by Congress fail to insure a consistent level of funding, as priorities within Congress change over time. Plus, executive-branch priorities also change over time; the spent-fuel project has rarely been considered a major federal priority in the last 20 years. It has never been a primary focus of DOE, whose mission is large and complex with multiple priorities.</p>
<p>Moreover, the skill sets at government agencies are different from those in business. As such, DOE’s people arguably lack the expertise, experience and background needed to manage and complete large construction projects.</p>
<p>Also, the siting process adopted by Congress in 1987 proved to be flawed when Congress chose the Yucca Mountain site without adequate technical knowledge of the specifications for such a site or of the geological characteristics of the site. Additionally, by dictating the site without sufficient involvement of either the local or state communities affected, the government generated instant opposition to the project—and that opposition has been unremitting. The ultimate consequence of this choice was the cancellation of the Yucca Mountain project. But more broadly, a top-down federal siting process that discounts local control or input has added to general public resistance to such facilities, and makes it unlikely that other locations will welcome what’s perceived as a national hazardous-waste dump.</p>
<p>Further, designing and constructing the facility turned out to be more technically complex than anticipated, perhaps because there was an assumption it would be easy compared with designing, building and operating a nuclear power plant. But whatever the reason, unexpected technical challenges increased development costs, and pushed Yucca Mountain’s schedule beyond a horizon that could receive consistent support by a federal government that tends to change hands approximately every four years.</p>
<p>Finally, DOE’s failure to begin accepting spent nuclear fuel as required by the NWPA has added to public distrust of nuclear power, since the public sees no credible solution for long-term disposal of spent fuel in a geologically safe environment.</p>
<p>A spent-fuel fedcorp could bring a fresh approach to decision making, and it would benefit from a more stable, long-term funding framework. Additionally, the idea of a fedcorp, at least in principle, enjoys strong support from the industry and its lawmakers. The Nuclear Energy Institute (NEI), representing the utilities that own nuclear power plants, favors the fedcorp model <i>(See “Rethinking Spent Fuel,” February 2011)</i>. Some prominent state regulators are on the record supporting a fedcorp, including Michigan Public Service Commissioner Greg White; and of course the current chairman of the House Energy Committee co-sponsored the Voinovich bill.</p>
<p>However, by itself, a federal corporation structure shouldn’t be considered any guarantee of success, as the failures and foibles of some federal entities have illustrated. The U.S. SynFuels Corp. of the early 1980s provides an instructive example. The project to produce synthetic fuels, primarily from coal, lost its mission when its primary driving force vanished—<i>i.e.</i>, the energy crisis ended, and petroleum prices dropped below the cost of the new fuels to be produced. And another example, Amtrak, continually suffers from the uncertainties of annual congressional appropriations.</p>
<p>There are, however, successful examples of corporations created as public entities with policy direction from Congress, such as the Tennessee Valley Authority (TVA) or more recently the U.S. Enrichment Corp. (USEC)—which was formed by the federal government in the early 1990s, and privatized in 1998.</p>
<p>Both successful and unsuccessful examples provide useful lessons. Several key steps stand out as being critically important in the effort to create a successful fedcorp to manage spent nuclear fuel.</p>
<h4>Step 1: Policy Mandate</h4>
<p>A central question for any new government corporation involves resolving how policy is set, and what functions and responsibilities accrue to the entity. In short, would the fedcorp be expected to craft policy on managing spent fuel, or would it receive such policy from the government?</p>
<p>Jack Bailey, TVA’s director of nuclear operations, argues that Congress and the administration—and not the board of a nuclear fedcorp—must bear the responsibility to establish America’s spent-fuel policy.</p>
<p>“We wouldn’t advocate that this fedcorp in any way establish policy,” Bailey says. “They are merely a tool to implement policy. That direction comes from the administration or the Nuclear Waste Policy Act, or some other legislative vehicle to establish overall policy.”</p>
<p>Bailey does, however, specify functions to be carried out by the fedcorp. “The [fedcorp’s] board—and the management that it would hire—need the flexibility to implement policy as best they see fit, and to manage the money that’s put into the fund in a way that’s most efficient toward achieving the results of the corporation.”</p>
<p>In other words, the fedcorp’s mandate should be firmly established—but it should also give the fedcorp the flexibility it needs to get the job done right.</p>
<h4>Step 2: An Independent Board</h4>
<p>Like any successful corporation, a nuclear waste fedcorp would need strong governance and management expertise. “The board structure needs to include people who understand business,” Bailey says. “It can’t all be political appointees, for example, who have really no knowledge or interest in the business.”</p>
<p>Additionally the fedcorp board should include representation from major stakeholder groups, who will ensure the corporation is directed and managed in an independent way. According to Bailey, TVA has been most successful “when the board has had the ability to act on behalf of its mission without having to worry about a lot of extraneous things, whether they be political or other issues.”</p>
<p>Of course, nuclear waste policy is an intensely political subject, and the fedcorp would need people capable of managing the public-interest aspects of the corporation’s mission.</p>
<p>Some witnesses speaking before the BRC advocated having representatives of the public on the fedcorp board. Others suggest this might be unnecessary, and that simply ensuring proper regulatory oversight by the NRC and EPA would satisfy the need to ensure fair and impartial review of the corporation’s actions. “Remember, any decision [the board members] make is going to be under the National Environmental Policy Act (NEPA), which requires them to engage the public and the environmental groups that might be concerned,” Bailey says. “So it’s going to be a very public process.”</p>
<p>Also, last year’s Voinovich bill specified that the National Association of Utility Regulatory Commissioners (NARUC) would contribute two members to the proposed board of directors. This provision was intended to ensure the interests of customers and state governments are represented in the fedcorp’s decisions.</p>
<h4>Step 3: Independent Funding</h4>
<p>Assuring the continuity of funding from year to year is the most compelling reason to create a new entity that has direct access to the annual revenues from the Nuclear Waste Fund. Without such funding, consistent progress on construction of a repository can’t move forward at a reliable pace. It’s important for public reassurance and to support the huge, long-term financial commitments involved in constructing a spent-fuel repository—and not let the constantly shifting political winds in Washington affect those commitments.</p>
<p>The Nuclear Waste Fund has been the designated repository for ratepayer and utility fees since 1982, with accrued funds (allocated within the federal budget) of about $25 billion, and annual payments of about $750 million. To date, about $10 billion has been spent toward the construction of a permanent repository, mostly on Yucca Mountain.</p>
<p>Both the corpus of the Nuclear Waste Fund and the ongoing ratepayer payments logically might become the principal financial assets of a nuclear waste fedcorp. But transferring either accrued funds or annual contributions to a new fedcorp entity isn’t a trivial matter. For one thing, the Nuclear Waste Fund is earmarked for a permanent repository—as opposed to other options, such as interim storage or on-site casks, for example. Allowing the fedcorp to pursue the most pragmatic approach might require some legislative changes in the fund’s charter.</p>
<p>But perhaps more importantly, the fund presents a difficult budgeting matter for Congress and the Office of Management and Budget (OMB). The issue has caused difficulties for previous efforts at reforming the way the federal government manages the Nuclear Waste Fund. In April 2006, DOE Secretary Samuel Bodman proposed an ambitious plan for managing nuclear spent-fuel and high-level waste, and that plan ran aground reportedly in part because OMB objected to transferring dollars from the Nuclear Waste Fund out of the federal balance sheet. “Funding reform is necessary to correct a technical budgetary problem that has acted as a disincentive to adequate funding,” Bodman stated.</p>
<p>The issue hasn’t improved since 2006. In testimony before the BRC in February, Mike Telson, DOE’s former chief financial officer, said his budget committee and the OMB had engaged in “Talmudic” discussions of this issue—implying such discussions were complex and could’ve gone on forever. Likewise Joe Hezir, a senior official at OMB for decades, explained that budgeting rules have become more restrictive and adverse in the context of transferring funds to a fedcorp. He said:</p>
<p>Such budget conflicts, however, aren’t necessarily deal killers for funding a spent-fuel fedcorp. Bailey of TVA, for example, argues that the $25 billion corpus of the Nuclear Waste Fund isn’t immediately needed to initiate a fedcorp. Annual ratepayer fees would be adequate to get the fedcorp started, and the government could transfer the corpus of the fund to the fedcorp books later—or even leave the fund where it is, and use that fund <i>in situ</i> as an asset to secure bonds issued for financing the fedcorp’s work.</p>
<h4>Step 4: Defined Liabilities</h4>
<p>The major liability that arises in creating a fedcorp involves the federal government’s failure to meet its obligations under the NWPA to assume responsibility for managing spent fuel beginning in 1998. Several utilities and state regulatory agencies have successfully sued the government for compensation arising from its violation and their additional costs for onsite spent-fuel storage. Exposure to this liability would prove problematic for a spent-fuel fedcorp.</p>
<p>In his BRC testimony, Phil Sewell, senior vice president of USEC, reinforced the need to be precise in identifying liabilities and assets as a key component of a making a new fedcorp successful. Further, Bailey of TVA says that no matter where the responsibility lands, paying the federal government’s damages from the waste fund would be indefensible from a legal and policy standpoint. “Essentially [it would be] asking the utilities to pay for their own lawsuit victory,” he says. “Because the money they’re taking is the money we’re paying in. That makes no sense at all.”</p>
<p>And indeed, a federal court in 2002 ruled that settlements from these suits must come out of the Department of Treasury judgment fund, rather than from the Nuclear Waste Fund.</p>
<p>But a fedcorp could also find itself holding the bag for other federal liabilities. For example, DOE has spent more than $7 billion on Yucca Mountain, and that work carries certain liabilities and responsibilities. Arguably they rest with DOE, and not a new entity without any involvement at Yucca Mountain.</p>
<p>If a fedcorp is created, however, then at some point in the future it will assume liability under the NWPA for the federal obligation to take spent nuclear fuel. So in defining fedcorp’s liabilities, policy makers will need to establish a reasonable timeline during which NWPA liabilities transfer to the fedcorp.</p>
<h4>Step 5: Collaborative Approach</h4>
<p>The existing siting process, established by Congress in 1987, hasn’t worked. Instead, it has generated strong opposition from the State of Nevada, led by Senate Majority Leader Harry Reid (D-Nev.). Also, problems that were unknown when the Yucca Mountain site was selected—including water intrusion and cracks in the mountain—have raised issues about its appropriateness as a repository that must, in effect, last forever.</p>
<p>The BRC held hearings at locations that illustrate both success and failure at siting similar facilities. Their investigations took the BRC to Europe and across the United States, and included testimony from many experts on siting issues—as well as from those who express grave concerns and fears about such siting. Almost universally, public officials—from mayors to governors to state legislators—demand a say in approving such sites. Some demand a binding veto. Others ask for a permitting role. Some want the Congress to dictate a site, while others urge a competition from local communities and states for a site with huge financial bonuses—as was the case in Sweden and Finland, where there has been permanent repository siting success <i>(see “<a href="http://www.fortnightly.com/fortnightly/2010/11/life-after-yucca">Life After Yucca</a>,” November 2010)</i>.</p>
<p>In any case, a spent-fuel fedcorp seems likely to succeed only if it can develop a new, collaborative approach to siting nuclear waste facilities. Also, to the degree the fedcorp considers interim storage options, it would need some way to establish credibility that “interim” isn’t a euphemism for “permanent” <i>(see “Tough Questions for Fedcorp”)</i>.</p>
<p>In the <i>Plan D for Spent Nuclear Fuel</i> report—produced by a group of academics, led by Prof. Clifford Singer at the University of Illinois at Urbana-Champaign—a key recommendation is that “every shipment of spent nuclear fuel material should be accompanied by a payment into a Permanent Fund, to be held by the recipient state as long as that material stays in the state… States would receive interest earnings on the Permanent Fund balance beyond any needed to maintain the minimum balance.”</p>
<p>The <i>Plan D</i> report also argues against a single long-term storage site—<i>e.g.</i>, the so-called “monopoly” approach that failed at Yucca Mountain. “A monopoly situation would generate tension within the state and with the federal government over whether the state had obtained adequate compensation,” Prof. Singer wrote. “This could lead to delays or even failure of the whole project again.” He suggested that a more successful process might involve about six finalist states, competing for two or preferably three repository site licenses—with an equal number of spent-fuel aging facilities to be licensed at repository sites.</p>
<h4>Clean Slate</h4>
<p>If the BRC recommends the federal government create a fedcorp to take over the process of siting a repository for spent nuclear fuel, it could establish a clean slate for resolving America’s nuclear waste dilemma. Properly structured, a fedcorp would allow a more rational and sustainable approach to the problem.</p>
<p>However, in order for it to succeed, the mission of such a fedcorp must be clearly defined, its powers carefully delineated, and its financing constructed so as to avoid the delays that have hampered DOE efforts to date.</p>
<p>A spent-fuel fedcorp would face a panoply of complexities in management, funding, legislative authority and structure, as well as legal and financial liabilities—and that’s before it even considers the technical and operational issues of siting, building and running nuclear waste facilities. This combination of complexities and difficulties has stymied progress by the DOE, but a dedicated fedcorp that’s more flexible and sustainably financed might be better positioned to tackle this generational challenge.</p>
<p>And now might be precisely the right time for the fedcorp idea.</p>
<p>A convergence of failures—<i>i.e.</i>, the accident at Fukushima, the cancellation of Yucca Mountain as a permanent repository for spent fuel, and the growing budget impact of litigation settlements related to DOE’s non-performance on its NWPA obligations—already represents a call for action on the safe storage of spent fuel. If proponents of a fedcorp approach are correct, a forthcoming BRC recommendation—and a federal decision to act upon it—could begin the process of turning these failures into a new beginning for America’s policy on nuclear spent fuel.</p>
</div></div></div><div class="field-collection-container clearfix"><div class="field field-name-field-sidebar field-type-field-collection field-label-above"><div class="field-label">Sidebar:&nbsp;</div><div class="field-items"><div class="field-item even"><div class="field-collection-view clearfix view-mode-full"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
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<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">&lt;b&gt;Fedcorp: Key Elements &lt;/b&gt;</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>When Philip G. Sewell, senior vice president of U.S. Enrichment Corp., testified before the Blue Ribbon Commission on America’s Nuclear Future in February 2011, he addressed what he considered to be the key elements for the establishment and operation of a successful government corporation. They included legislation, corporation assets, existing contracts, the role of the U.S. Treasury, delineation of liabilities, a regulatory oversight path, strong management, and a viable cost structure. Sewell advised:</p><p>• The enacting legislation must be thorough enough to provide the corporation with legal standing to perform its business, establish a strong and independent corporate governance structure, and provide it with means (financial, personnel, regulatory) to be an effective business.</p><p>• The transfer of assets and a clear definition of the value of those assets is necessary to support the organization’s future viability.</p><p>• The government must transfer existing contracts (<i>i.e.</i>, customer, power, services) on favorable enough terms to support business operations.</p><p>• The role of the U.S. Treasury in the management of the corporation’s assets, cash and returns to the government must be defined.</p><p>• There must be a clear delineation of liabilities between the government and the new corporation.</p><p>• A clear regulatory oversight path for immediate term and long-term management of spent nuclear fuel must be established.</p><p>• The new entity needs a strong mix of experienced managers from private and government sectors.</p><p>• There must be a viable cost structure that will support its operations.–JB</p><p> </p></div></div></div> </div>
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<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">&lt;b&gt;Tough Questions for Fedcorp &lt;/b&gt;</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>Policy makers considering possible approaches to creating a spent-fuel fedcorp face a critical question, whose answer could spark a potential firestorm of controversy. Specifically, would the fedcorp be authorized to consider all the possible ways to deal with spent fuel, or would its mandate allow only a narrow set of acceptable solutions?</p><p>If the fedcorp gets a broad mandate, then it will have to consider two fundamental questions. First, should we recycle our spent nuclear fuel, the way they do in France and other countries? And second, should storage options include only the possibility of a permanent repository like Yucca Mountain, or should we consider potential interim-storage solutions.</p><p>With regard to the first question, the prospect of recycling or reprocessing spent fuel opens the door to a complex and provocative debate. Specifically, current reprocessing systems are too expensive to be justified on a purely economic basis; in other words, fresh fuel is much cheaper than recycled fuel, even when avoided disposal costs are factored into the price. However, the other side of the argument suggests that current economics might not prevail. Following this rationale, recycling should be part of a long-term plan for spent-fuel management, if only because nuclear fuel represents a finite resource. At the very least, any approach to managing spent fuel shouldn’t foreclose the future possibility of reclaiming the large remaining energy value in stored nuclear waste.</p><p>George Dials, executive vice president of B&amp;W Technical Services Group and former director of the DOE Carlsbad Field Office, told the Blue Ribbon Commission on America’s Nuclear Future (BRC), “I truly believe we are going to need all the energy in the used nuclear fuel that we have in the long-term future for this country.” In his written testimony, Dials stated that a once-through disposal solution “is counter to establishing a complete, closed nuclear fuel cycle… [W]e must establish a commercial nuclear fuel reprocessing/recycling enterprise to sustain our nuclear power capabilities.”</p><p>In addition to hearing such testimony, the BRC visited nuclear power plant facilities in France, and learned about Areva reprocessing technology and facilities in that country. If those actions provide any clue, it’s possible the BRC’s recommendations will at least leave open the door to reprocessing as a solution for future consideration.</p><p>However, economic viability isn’t the only issue affecting the recycling option. The other major issue is proliferation risk. To the degree reprocessing yields plutonium (Pu), it triggers a complex set of policy questions—not only domestic policy, but also U.S. obligations under international non-proliferation treaties dating back to 1969.</p><p>The Blue Ribbon Commission discussed reprocessing spent fuel and proliferation concerns at a hearing in October 2010. Although the hearing spawned many disagreements, one clear fact emerged: If and when a fedcorp addresses the question of whether to pursue reprocessing on any level, then it also will face the question of how to deal with proliferation concerns. As James M. Acton of the Carnegie Endowment for International Peace told the BRC, “This fuel cycle choice would send the message that reprocessing was an essential part of a modern nuclear energy program and enhance the risk that other states would develop PUREX”—<i>i.e.</i>, technologies that produce Pu as a by-product.</p><h4>Interim vs. Permanent</h4><p>In principle and in statute, U.S. policy on spent-fuel management requires the federal government to assume possession of commercial nuclear waste and manage it in a permanent repository. In practice, however, U.S. nuclear operators are storing almost all of their spent fuel onsite—much of it in pools of water, and some in dry casks. Although water pools are supposed to provide only temporary quarters to allow fuel rods to cool down, dry casks are considered an interim solution, which allows nuclear generation to continue while a permanent repository is developed.</p><p>Now, a key question affecting a nuclear waste fedcorp will be whether it can only build permanent storage, or whether one or more centralized interim storage facilities are allowable. Interim storage offers some important advantages—namely an interim facility can be built much more quickly than a permanent repository, and it would provide breathing room for policy makers to define workable long-term solutions—<i>i.e.</i>, either spent-fuel reprocessing, permanent geologic sequestration, or both.</p><p>On the other hand, interim storage would add substantial costs and potentially contentious transportation requirements to the overall challenge of managing spent fuel. It also creates the perception—and arguably the reality—that interim sites would become <i>de-facto </i>permanent sites, posing long-term security and public health concerns. Rather than solving the problem, interim storage might in effect be nothing more than a costly exercise in reshuffling.</p><p>The BRC considered these issues in its deliberations before the Fukushima crisis happened. Since then, risks involving onsite storage of spent fuel have been exposed to the glare of public attention—adding pressure to the BRC’s mission and perhaps changing its perspective on how to prioritize various options.</p><p>In short, the Fukushima disaster has raised a sense of urgency about resolving spent-fuel issues, and potentially driving the BRC—and any prospective nuclear waste fedcorp—toward solutions that reduce the risk of radioactive releases sooner rather than later.–JB and MTB</p></div></div></div> </div>
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</div></div></div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/nuclear-fuel-cycle">Nuclear Fuel Cycle</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/environmental">Environmental</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/energy-policy-legislation">Energy Policy &amp; Legislation</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1105/images/1105-FEA1.jpg" width="720" height="498" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/barack-obama">Barack Obama</a><span class="pur_comma">, </span><a href="/tags/clifford-singer">Clifford Singer</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/doe-secretary-samuel-bodman">DOE Secretary Samuel Bodman</a><span class="pur_comma">, </span><a href="/tags/epa">EPA</a><span class="pur_comma">, </span><a href="/tags/fred-upton">Fred Upton</a><span class="pur_comma">, </span><a href="/tags/fukushima">Fukushima</a><span class="pur_comma">, </span><a href="/tags/fukushima-disaster">Fukushima disaster</a><span class="pur_comma">, </span><a href="/tags/fukushima-daiichi-0">Fukushima-Daiichi</a><span class="pur_comma">, </span><a href="/tags/funding-reform">Funding reform</a><span class="pur_comma">, </span><a href="/tags/george-voinovich">George Voinovich</a><span class="pur_comma">, </span><a href="/tags/greg-white">Greg White</a><span class="pur_comma">, </span><a href="/tags/harry-reid">Harry Reid</a><span class="pur_comma">, </span><a href="/tags/jack-bailey">Jack Bailey</a><span class="pur_comma">, </span><a href="/tags/joe-hezir">Joe Hezir</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/commissioner-greg-white">Commissioner Greg White</a><span class="pur_comma">, </span><a href="/tags/mike-telson">Mike Telson</a><span class="pur_comma">, </span><a href="/tags/naruc">NARUC</a><span class="pur_comma">, </span><a href="/tags/national-association-utility-regulatory-commissioners">National Association of Utility Regulatory Commissioners</a><span class="pur_comma">, </span><a href="/tags/national-environmental-policy-act">National Environmental Policy Act</a><span class="pur_comma">, </span><a href="/tags/nei">NEI</a><span class="pur_comma">, </span><a href="/tags/nepa">NEPA</a><span class="pur_comma">, </span><a href="/tags/nrc">NRC</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/nuclear-energy-institute">Nuclear Energy Institute</a><span class="pur_comma">, </span><a href="/tags/nuclear-energy-institute-nei">Nuclear Energy Institute (NEI)</a><span class="pur_comma">, </span><a href="/tags/nuclear-fuels-management-corp">Nuclear Fuels Management Corp.</a><span class="pur_comma">, </span><a href="/tags/nuclear-waste-fund">Nuclear Waste Fund</a><span class="pur_comma">, </span><a href="/tags/nuclear-waste-policy-act">Nuclear Waste Policy Act</a><span class="pur_comma">, </span><a href="/tags/nwpa">NWPA</a><span class="pur_comma">, </span><a href="/tags/phil-sewell">Phil Sewell</a><span class="pur_comma">, </span><a href="/tags/s3322">S.3322</a><span class="pur_comma">, </span><a href="/tags/s3661">S.3661</a><span class="pur_comma">, </span><a href="/tags/senate-majority-leader-harry-reid">Senate Majority Leader Harry Reid</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/tennessee-valley-authority-0">Tennessee Valley Authority</a><span class="pur_comma">, </span><a href="/tags/united-states-nuclear-fuel-management-corporation-establishment-act-2008">The United States Nuclear Fuel Management Corporation Establishment Act of 2008</a><span class="pur_comma">, </span><a href="/tags/tva">TVA</a><span class="pur_comma">, </span><a href="/tags/us-enrichment-corp">U.S. Enrichment Corp.</a><span class="pur_comma">, </span><a href="/tags/united-states-nuclear-fuel-management-corporation">United States Nuclear Fuel Management Corporation</a><span class="pur_comma">, </span><a href="/tags/united-states-nuclear-fuel-management-corporation-establishment-act-2008-0">United States Nuclear Fuel Management Corporation Establishment Act of 2008</a><span class="pur_comma">, </span><a href="/tags/university-illinois">University of Illinois</a><span class="pur_comma">, </span><a href="/tags/usec">USEC</a><span class="pur_comma">, </span><a href="/tags/yucca-mountain">Yucca Mountain</a> </div>
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Sun, 01 May 2011 04:00:00 +0000puradmin14108 at http://www.fortnightly.comPeople (December 2010)http://www.fortnightly.com/fortnightly/2010/12/people-december-2010
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">People</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - December 2010</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><span class="boldred">New Opportunities: </span><b>Chesapeake Utilities</b> named <b>Michael P. McMasters</b> president and CEO, due to the planned retirement Jan. 1, 2011 of CEO <b>John R. Schimkaitis</b>.</p>
<p><b>Duke Energy</b> appointed <b>Doug Esamann</b> president of its Indiana service region. Esamann was interim president since October 12. He replaces <b>Mike Reed</b>, who, according to Associated Press reports, was dismissed upon conclusion of an ethics inquiry into Reed’s previous role on the Indiana Utility Regulatory Commission. Duke dismissed attorney <b>Scott Storms</b> as a result of the same inquiry.</p>
<p><b>American Transmission</b> named John Flynn v.p. of business development, a newly created position.</p>
<p><b>Allen Nye</b> joined <b>Oncor</b> as senior v.p. and general counsel. Nye is a partner at the Dallas office of Vinson &amp; Elkins.</p>
<p><b>FirstEnergy Corp</b>. promoted <b>Kevin Burgess</b> to assistant controller. He was assistant controller, FirstEnergy Utilities. <b>Jon Taylor</b>, formerly manager, financial reporting and technical accounting at FirstEnergy Utilities, was promoted to Burgess’s previous position.</p>
<p><b>Alliant Energy</b> hired <b>James H. Gallegos</b> as v.p. and general counsel. Gallegos was vice president and general counsel at Burlington Northern and Santa Fe Corp., and before that a staff attorney with Qwest. He replaces <b>Barbara J. Swan</b>, who is retiring as FirstEnergy general counsel and president of Wisconsin Power &amp; Light (WPL) subsidiary. The company named <b>John O. Larsen</b> to succeed Swan as WPL president.</p>
<p><b>Stacy Kilcoyne</b> was named v.p., human resources for <b>Southern Company</b>. Kilcoyne brings more than 30 years of experience to the position.</p>
<p><b>GeoGlobal Energy</b> named <b>Joe Cleary</b> director of construction.</p>
<p><b>David W. Hilt</b> joins <b>Quanta Technology</b> as v.p. of regulatory services. Formerly, Hilt was v.p. of compliance at the North American Electric Reliability Corp. (NERC). He also served as v.p. of operations and engineering at NERC.</p>
<p>The <b>New York Independent System Operator </b>(NYISO) retained former FERC Commissioner <b>Suedeen Kelly</b> as a strategic energy policy advisor. Kelly is a partner with Patton Boggs.</p>
<p>The <b>Organization of MISO States </b>elected Michigan Public Service Commissioner <b>Monica Martinez </b>president of the organization.</p>
<p><b>Gridwise Alliance</b> Chairman <b>Guido Bartels</b> was re-appointed to the United States Department of Energy’s (DOE) Electricity Advisory Committee.</p>
<p> </p>
<p><span class="boldred">Boards of Directors:</span> <b>Dr. Steven R. Specker</b> was elected to the <b>Southern Company</b> board of directors. Specker recently retired from the Electric Power Research Institute (EPRI), where he served as president and CEO from 2004 to 2010.</p>
<p><b>Bob Dawson</b>, president and CEO of <b>SouthernLINC Wireless</b>, a Southern Company affiliate, was elected to the 2011 board of directors of <b>CTIA-The</b><b>Wireless Association</b>.</p>
<p><b>Solar Electric Power Association</b> (SEPA) elected five new members to its board of directors and re-elected one member to serve an additional term. They are: <b>Eran Mahrer</b>, director of renewable energy, Arizona Public Service; <b>Luis Reyes</b>, CEO of Kit Carson Rural Electric Cooperative; <b>Theresa Williams</b>, senior policy advisor, Western Area Power Administration; <b>Mark Dougherty </b>(re-elected), director of distributed generation and renewable programs, Long Island Power Authority.</p>
<p>The <b>American Solar Energy Society </b>(ASES) elected three new members to its board: <b>Mary Guzowski</b>, associate professor of architecture, University of Minnesota; <b>David Panich</b>, co-owner, Panich + Noel Architects; and <b>Phil Smithers</b>, technical services leader, renewable energy unit, APS.</p>
<p><b>Empire District Electric </b>announced that <b>Bill Helton</b> will retire from the board on April 28, 2011. <b>Thomas Ohlmacher </b>has been nominated to fill the board vacancy and will stand for election at the company’s annual meeting of stockholders. Ohlmacher has been president and COO of Black Hills non-regulated energy group since 2001.</p>
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<p><i>We welcome submissions to People, especially those accompanied by a high-resolution color photograph. E-mail to: <a href="mailto:people@pur.com">people@pur.com</a>.</i></p>
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Wed, 01 Dec 2010 05:00:00 +0000puradmin13557 at http://www.fortnightly.comBlue Ribbon Missionhttp://www.fortnightly.com/fortnightly/2010/07/blue-ribbon-mission
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Can a broadly based committee resolve the nuclear waste dilemma? </b></p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>John Bewick</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>John Bewick</b> is a former secretary of environmental affairs for the Commonwealth of Massachusetts, and director, verification and validation services, with Enviroplan Consulting. A frequent contributor to Public Utilities Fortnightly, Bewick, who holds a graduate degree in nuclear science, is covering the nuclear Blue Ribbon Commission’s work on an ongoing basis for <i>Fortnightly</i> and <i>Fortnightly.com</i>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - July 2010</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In January, the Obama administration appointed a high-powered Blue Ribbon Commission on America’s Nuclear Future (BRC) to address one of the nation’s great continuing dilemmas, the management and disposition of nuclear waste.</p>
<p>Delivering his charge to commission members at their organizational meeting, Energy Secretary Stephen Chu set forth their challenge, and gave the commission a two-year time frame to work with. The commission isn’t tasked to site a repository, but rather to look at the whole nuclear fuel cycle, and at what technologies might be available in coming years that will affect that cycle. He wants commission members to review how things should be set up as technology progresses, both to reduce the amount of or the toxicity of the material separated from spent fuel, and to determine how to dispose of what won’t be wanted, the residual material, in the future, both near term and long term. He also asked the BRC to recommend changes to the decision process.</p>
<p>Among other guideposts for the commission, Secretary Chu pointed out that the NRC has made clear that dry-cask storage above ground is safe for decades—possibly 100 years. However, he also suggested the commission needs to deal with the problems that might emerge after those decades elapse, including the possibility of high-burnup reactors that might reduce the lifetime of the waste and change what’s needed for disposal in the future.</p>
<p>Given this broad set of marching orders, cynics might argue that the BRC provides nothing more than political cover for the Obama administration—to lend credence to its stated support for zero-carbon emitting nuclear development, and to show that it’s working on an alternative to the Yucca Mountain repository that it took “off the table” last year. But at their first meeting earlier this year, the BRC commissioners themselves expressed determination to avoid becoming just another Washington committee providing a report for the National Archives. As evidence of their intent, the second session in late May provided an excellent seminar on the range of complex issues BRC members must weigh in their deliberations.</p>
<p>The composition of the commission itself is reassuring. One Washington nuclear scientist observed (under condition of anonymity) that with the makeup of the commission’s membership, it must be taken seriously. Appointed members include knowledgeable members, capable of crafting both a sensible technical road map for the future as well as one that will be politically credible. Those with respected political credentials include former Congressmen like Phil Sharp and Lee Hamilton (BRC co-chair), Senators Pete Domenici and Chuck Hagel, former NRC chairman Richard Meserve, and former National Security Agency Chief Brent Scowcroft (the other co-chair). On the technical side Exelon CEO John Rowe, MIT Nuclear Department Head Prof. Ernest Moniz, and Allison MacFarlane, an environmental expert from George Mason University, bring a mature practical understanding of the issues.</p>
<p>In its first sessions, in addition to the directives from Secretary Chu, the BRC received testimony from expert witnesses who articulated many of the hurdles that a re-invigorated spent-fuel management program must address. The commission’s process is open to public scrutiny and comment. The issues as they are being laid out for the BRC seem clear, and though challenging, they aren’t insurmountable. But whether the BRC can overcome the hurdles before it and bring about meaningful change to nuclear waste management might depend on the ability of its leaders to focus on a mission that’s both politically and practically achievable.</p>
<p><b>Political Context </b></p>
<p>Understanding this commission’s purpose and timing requires understanding a complex political context.</p>
<p>In 1982, the <i>Nuclear Waste Policy Act</i> established the federal government’s responsibility to provide a place for the permanent disposal of high-level radioactive waste and spent nuclear fuel by 1998. The act also set forth the generators’ responsibility to bear the costs of permanent disposal. As a requirement, a nuclear waste fund was created from charges on nuclear electricity users. Thus, the ratepayers would pay for the development and construction of the needed waste-disposal facilities.</p>
<p>Since 1984, nuclear power ratepayers have paid more than $17 billion into the nuclear waste fund that grew over time to $34 billion and now has a balance of $24 billion. The National Academy of Sciences (NAS) alone has performed about 140 studies since 1956, and spent some $4 billion on siting at Yucca Mountain facilities out of the $13 billion expended to date. With the cancellation of the Yucca Mountain option, the ratepayers have received nothing in return for their massive investment. Representing the utilities and these ratepayers, the National Association of Regulatory Utility Commissioners (NARUC) forcefully articulated the outrage of their constituents at the BRC sessions. They decried the failure of the federal government to meet its obligation under the 1982 act to begin accepting nuclear waste by 1998. Thus the BRC begins its work in the context of the federal government’s $30 billion failure to develop a site for storing the nation’s nuclear waste.</p>
<p>The Yucca Mountain site was shut down at least in part because of the opposition of Senate Majority Leader Harry Reid (D-Nev.). In principle, it could be resurrected if either Senator Reid loses re-election to a candidate who supports the repository, or if NARUC wins a lawsuit it has mounted against the federal government to prevent the shutdown.<sup>1</sup><b> </b>Either outcome could affect the commission’s ultimate recommendation.</p>
<p>Many states and cities are opposed to having nuclear waste facilities within their borders, even though most states currently store such waste. Likewise, Nevada has said no to Yucca Mountain, but recent polls indicate support might be increasing—particularly for facilities that aren’t perceived as merely a dump for nuclear waste.<sup>2</sup> Thus, in spite of broad popular opposition, the prospect for siting nuclear spent-fuel management facilities is difficult, but not hopeless. The BRC heard National Conference of State Legislators spokesperson Sally Young from Maryland and Sen. Domenici both point out there are multiple cities and states interested in housing such facilities, even as they acknowledged that support sometimes dwindles when a concrete proposal is made.<i> (See “<a href="http://www.fortnightly.com/fortnightly/2010/07/nuclear-yimby">Nuclear YIMBY</a>”)</i>.</p>
<p>Turning theoretical support into lasting commitments will require a siting process that’s more attuned to public sentiments than previous processes were, including the possibility of giving cities and towns a veto over such a facility. Defining such a process might prove to be one of the BRC’s most important tasks, if policymakers hope to garner public confidence in any future siting efforts.</p>
<p><b>Buying Time with Interim Storage </b></p>
<p>Although the BRC doesn’t need to specify interim and permanent storage solutions in its recommendations, it does need to redefine the path forward. Several experts, including Kevin Crowley of the National Academy of Sciences (NAS) and Matthew Bunn of Harvard’s Managing the Atom project, have advised the BRC to focus on interim storage of spent fuel from shut-down power plants for the next hundred years, and then to set in motion a new process for permanent storage. Most experts concur that permanent storage in a geologic formation is needed. There’s also agreement that the United States has decades to develop the technical understanding needed to complete the permanent storage facility. With an interim storage facility in place, the public interest would be fully protected in the short term.</p>
<p>The urgent need for a consolidated interim storage facility was highlighted for the BRC by the testimony of Frank Marcinowski, deputy assistant secretary for regulatory compliance in DOE’s Office of Environmental Management. He described the broad and scattered storage for spent nuclear fuel and high-level wastes throughout the United States. Adding to the urgency, Mark Holt of the Congressional Research Service warned that reactor pools have reached their capacity, increasing the immediate need for dry cask storage.</p>
<p>This situation is adversely affecting local communities, because valuable real estate is unusable due to current storage practices. As reactors shut down, abandoned sites such as the 700-acre Palisades site on Lake Michigan are prevented from being converted to new uses by the continued presence of spent-fuel repositories. Michigan Public Service Commissioner Greg White, representing NARUC, pointed out that 10 reactors have been permanently shut down at nine sites. A consolidated facility for transfer and storage of waste from shut-down nuclear plants is a high priority.</p>
<p>There seemed to be a consensus among both witnesses and members of the commission that a step-wise approach to siting would build public confidence and trust. The steps would include establishing a consolidated interim storage facility for shut-down reactors, and establishing a consultative approach to potential permanent disposal in a geologic formation. The consultative approach would move forward with more clarity after regulatory standards have evolved, and, possibly, after new reactor types have reduced the quantity of long-term wastes.</p>
<p>As Bunn put it, “We should not put permanent repositories on an indefinite back-burner, but should establish a credible repository program, in part because this is likely to be important to gaining public acceptance for interim storage sites.”</p>
<p>This is true whatever nuclear fuel-cycle options the United States pursues. Thomas Cochran of the National Resources Defense Council (NRDC) argued that the BRC needs to get the geologic storage program back on track. The prevailing sentiment is that the United States can take time to develop permanent storage with a consolidated interim storage facility so that there will be better understanding of the technologies, and more public support for a long-term solution. How to manage, fund, and develop long-term storage is a vital issue on the BRC agenda.</p>
<p><b>Reprocessing Realities </b></p>
<p>Invited experts speaking at the BRC’s May meeting expressed almost unanimous opposition to reprocessing of spent nuclear fuel—some because of the high costs, some because of the technology involved, and others because of the increased risk of proliferation.</p>
<p>Harvard University’s Bunn put proliferation in perspective when he said: “Reprocessing and recycling using the only technologies now commercially available means separating, fabricating and transporting tons of weapons-usable plutonium every year—when even a few kilograms is enough for a bomb. This inevitably raises risks of nuclear proliferation and nuclear terrorism not posed by direct disposal.”</p>
<p>The BRC heard witnesses say that because of this proliferation risk, reprocessing should be studied but not implemented until there’s more certainty about how to prevent materials from being weaponized, and international agreements are established to manage the risks.</p>
<p>But the issue is more complex than the experts’ testimony indicated. If there’s a great increase in demand for nuclear power, as the commission discussed with DOE Program Analyst Matthew Crozat at its initial meeting, then demand for uranium will increase and reprocessing will become a source of reactor fuel as well as an opportunity to reduce the amount of spent fuel requiring permanent geological storage.</p>
<p>How we treat nuclear wastes in the future might be determined, in part, by whether or not we’ll need the energy contained in the waste. At present, most experts agree that reprocessing is both too expensive and unnecessary, since there seems to be plenty of uranium ore available. That might change, however, and reprocessed fuel might become needed to achieve long-term national energy sufficiency and supply new reactors built to fight climate change.</p>
<p>Reprocessing also might be the best way to get spent fuel into a form that’s safer for long-term disposal. This would be accomplished by removing the long-lived material, leaving fission products that have short half-lives and are easier to store permanently in a geologic formation. Such objectives would require new reactor and reprocessing technologies that haven’t yet been developed. Thus the commission’s recommendations need to allow for a dynamic evolution of response to future events, and must weigh economic and proliferation factors in the context of long-term energy goals.</p>
<p><b>Focusing the Mission </b></p>
<p>The commission’s mandate is very broad and could easily be overwhelming to ordinary mortals. The commission doesn’t have the time to solve every problem of nuclear waste disposal and management. Indeed, experts suggest that some of the more intractable problems of reprocessing, proliferation and permanent geologic storage can, and should, be dealt with over the decades to come.</p>
<p>To achieve effectiveness and results, the commission arguably must narrow its focus. Short-term storage naturally rises to the top of an action agenda. Witnesses speaking at the May BRC meeting expressed the nearly unanimous opinion that dealing with short-term interim storage is the commission’s most important task, along with establishing a management process for addressing the longer term fuel-cycle issues.</p>
<p>Some experts, like Crowley of NAS, advised the BRC that the entire process needs to be revised, and that the DOE effort over the past decade won’t result in a long-term solution because of the narrow way the <i>Nuclear Waste Policy Act</i> mandates solutions. This perspective largely echoes what NAS said two decades ago in a 1990 position paper.<sup>3</sup><b> </b>Experience since then has reinforced the same conclusion.</p>
<p>Two management options emerged from preliminary BRC testimony: Either a new, independent agency with funding directly from the nuclear waste fund, independent of annual Congressional appropriation; or a new corporation to be established and run by the nuclear industry with some kind of federal oversight and funded directly from the nuclear-waste fund.</p>
<p>Tom Sanders of the American Nuclear Society (ANS) called for creating an independent entity to oversee management of the current and expected stockpile of U.S. spent nuclear fuel. And Commissioner Greg White of the Michigan PSC and NARUC urged consideration of other organizational alternatives. He pointed out that Canada has a “well-managed interim storage program in place” with a “nuclear waste management organization, responsible for the repository program, created and managed by the nuclear reactor owners.” (<i>See “Spent Fuel Management Models.”</i>)</p>
<p>During the BRC meeting in May, there seemed to be strong support for turning much of this management over to the private sector—perhaps through the new U.S. Nuclear Waste Management Corp. recently proposed by Senator George Voinovich<sup>4</sup> —or to an independent nuclear-waste management agency separated from DOE, with a reliable funding mechanism independent of annual Congressional appropriations. Norris McDonald of the Nuclear Fuels Reprocessing Coalition called for “a financially autonomous, federal corporation to replace DOE.”</p>
<p>Moving forward, the commission proposed to establish three sub-committees to deal in detail with the questions of storage, reprocessing and disposal. The scope of the sub-committees and membership are being reviewed with Energy Secretary Chu, in advance of the BRC’s next meeting in July.</p>
<p>No matter what approach the BRC takes, the potential scope of its mandate is enormous, time is limited, and focus is essential to success.</p>
</div></div></div><div class="field-collection-container clearfix"><div class="field field-name-field-sidebar field-type-field-collection field-label-above"><div class="field-label">Sidebar:&nbsp;</div><div class="field-items"><div class="field-item even"><div class="field-collection-view clearfix view-mode-full field-collection-view-final"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
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<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">Spent Fuel Management Models</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>The DOE’s nuclear Blue Ribbon Commission (BRC) is considering changes in the way America handles nuclear spent fuel, and several witnesses at the BRC’s May 2010 meeting in Washington, D.C., outlined alternative management scenarios.</p><p>Ratepayers have spent more than $17 billion since 1984 on the Nuclear Waste Fund, with neither an interim nor a permanent disposal site to show for the investment. Many witnesses speaking at the BRC’s meeting in May expressed outrage over this handling of ratepayer funds, and argued the Nuclear Waste Fund money should be transferred to a new management entity capable of getting facilities built.</p><p>Defining and recommending how this entity is organized and managed, and what its role should be, present key challenges for the BRC. Fortunately, several models exist—some created by America’s national allies.</p><p>• Canada: The Nuclear Waste Management Organization (NWMO) was established in 2002 under Canada’s <i>Nuclear Fuel Waste Act</i> (NFWA) to investigate approaches for managing Canada’s used nuclear power-generation fuel. The NFWA required electricity-generating companies that produce used nuclear fuel to establish a waste-management organization that provides recommendations to the government on the long-term management of used nuclear fuel, and also to establish segregated trust funds to finance the long-term management of the used fuel. To date, three entities with interim storage in on-site dry casks have raised $1.8 billion, and a siting process is in development.</p><p>• Sweden: Nuclear power companies jointly established the Swedish Nuclear Fuel and Waste Management Co. (SKB) in the 1970s. SKB’s assignment is to manage and dispose of all radioactive waste from Swedish nuclear power plants in such a way as to secure maximum safety for human beings and the environment. SKB is responsible for a system of facilities used to handle all waste from the Swedish nuclear power plants. These facilities include a central interim storage facility for spent nuclear fuel (Clab) near Oskarshamn started in 1986, and a final repository for short-lived radioactive waste (SFR) in Forsmark is expected to be proposed in 2010. A poll of residents in the community of Oskarshamm found 84 percent responded in favor of the facility.</p><p>• Finland: In accordance with the <i>Nuclear Energy Act</i>, power companies are responsible for their own waste. Companies must manage existing waste appropriately, and prepare for nuclear waste management to be implemented in the future. They also are responsible for all nuclear-waste management costs. Power companies incorporate the cost of waste management in the price of nuclear electricity and deposit the collected money in a nuclear waste fund, which is managed by the Ministry of Employment and The Economy. By the end of 2008, the fund contained about 1.7 billion euros.</p><p>• U.S. GRI Model: The <i>Nuclear Waste Policy Act </i>of 1982 gave the responsibility for disposal of nuclear wastes to the DOE. There’s no comparable private-sector responsibility for nuclear-waste disposal, but there is an interesting example of the private sector being empowered by the federal government to manage an R&amp;D program that was commercially successful for several decades. The Gas Research Institute, approved by the Federal Power Commission in the 1970s with oversight by the FERC, worked well for several decades and produced commercial products at twice the success rate of the private sector—due, in part, to the oversight of the FERC and the need to justify its investment decisions. This is another model worth considering for managing nuclear wastes in the United States, along with the option to create a separate, independent agency within government.–JB</p><p><b>Endnotes: </b></p><p>1. <i>NARUC v. U.S. Department of Energy and the United States</i>, 10-1074, DC Circuit Court of Appeals, April 2, 2010<i>. </i></p><p>2. <i>Las Vegas Review-Journal</i>/Mason-Dixon poll, April 2010<i>. </i></p><p>3. <i>Rethinking High-Level Radioactive Waste Disposal</i>, National Academy of Sciences, 1990<i>. </i></p><p>4. <i>U.S. Nuclear Fuel Management Corporation Establishment Act of 201</i>0, May 2010, fact sheet<i>.</i></p></div></div></div> </div>
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<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/george-voinovich">George Voinovich</a><span class="pur_comma">, </span><a href="/tags/greg-white">Greg White</a><span class="pur_comma">, </span><a href="/tags/harry-reid">Harry Reid</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/john-rowe">John Rowe</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commission">Michigan Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/michigan-public-service-commissioner-greg-white">Michigan Public Service Commissioner Greg White</a><span class="pur_comma">, </span><a href="/tags/mit">MIT</a><span class="pur_comma">, </span><a href="/tags/naruc">NARUC</a><span class="pur_comma">, </span><a href="/tags/national-association-regulatory-utility-commissioners">National Association of Regulatory Utility Commissioners</a><span class="pur_comma">, </span><a href="/tags/national-resources-defense-council">National Resources Defense Council</a><span class="pur_comma">, </span><a href="/tags/nrc">NRC</a><span class="pur_comma">, </span><a href="/tags/nrdc">NRDC</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/nuclear-waste-policy-act">Nuclear Waste Policy Act</a><span class="pur_comma">, </span><a href="/tags/palisade">Palisade</a><span class="pur_comma">, </span><a href="/tags/security">Security</a><span class="pur_comma">, </span><a href="/tags/senate-majority-leader-harry-reid">Senate Majority Leader Harry Reid</a><span class="pur_comma">, </span><a href="/tags/sharp">Sharp</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/yucca-mountain">Yucca Mountain</a> </div>
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Thu, 01 Jul 2010 04:00:00 +0000puradmin13617 at http://www.fortnightly.com